Debate on energy tax shifts to how it would be implemented

Gov. Dannel P. Malloy and Democratic lawmakers appear set on the idea of imposing a new state tax on energy generation. The debate has now shifted to how that tax should be structured, and whether or not it would get passed on to consumers in the form of higher electric rates.

"A decision about a tax has already been made -- it's already in the finance package -- the question is what exactly that tax will look like," state Rep. Vickie Nardello, D-Cheshire, co-chairman of the legislature's energy committee, said Tuesday ."The number can be debated and we can reach a number that people agree with … it's the structure that I'm more concerned with."

Nardello made her remarks immediately after a news conference at the state Capitol complex, where a Connecticut AARP director warned that Malloy's energy generation tax would likely result in consumers paying more.

The tax is projected to generate $72 million a year in state revenue by taxing nearly all electricity producers at the same rate, whether they're nuclear, coal, oil, or natural gas. Only renewable sources such as solar would be exempt under the temporary, two-year tax.

"We do not believe the ($72 million) that's account for in the governor's budget is the way to go because we do believe that will get passed along to the ratepayers," said John Erlingheuser, AARP Connecticut advocacy director.

Erlingheuser said rates would increase because Malloy's tax wouldn't exempt any major form of generation. "That sets the clearing price for all generation, so you're raising the clearing price that everybody gets to rise up with, thereby raising rates because that gets passed along to ratepayers," he said.

A spokeswoman for the governor issued the following response to AARP concerns about his tax proposal: "Governor Malloy is acutely aware of the shared sacrifice he is asking of everyone in the state. There are no easy answers. But he believes that his proposal is the most equitable and fair and will help stabilize our state's economy and put people back to work."

An alternative proposal, backed by Nardello and fellow co-chairman State Sen. John Fonfara, D-Hartford, has passed their energy committee but isn't in the revised version of the governor's budget.

Nardello said she also fears the Malloy energy tax plan would result in higher rates. Nardello said the structure of Senate Bill 1176 -- the measure she backs -- would keep rates down because it doesn't impose a tax on natural gas. That measure is projected to generate $340 million by taxing nuclear as well as oil and coal generation. Renewables would also be exempt.

"If you go back to a system where you tax gas generation as well, you have a much higher likelihood that it will be passed on to consumers," Nardello said.

However, the Nardello-backed tax would fall disproportionately on the Millstone Power Station in Waterford, the state's sole operating nuclear facility. Plant owner Dominion says the measure would cost it $332 million annually and force the company to shut down Millstone for economic reasons.

Yet Nardello insists that Dominion would still make $200 million in annual profits at Millstone under the tax. The company disputes her assertion.

But Dominion says it is willing to absorb the $40 million annual cost of the Malloy tax.

The AARP announced at the news conference the results of a survey showing that eight in 10 Connecticut residents who are at least 50 years old are concerned about the rising cost of electricity in the state, and feel they're paying too much.


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